Internal Revenue Bulletin:
2004-37

September 13, 2004

Rev. Rul. 2004-92

Interest rates; underpayments and overpayments. The
rate of interest determined under section 6621 of the Code for the calendar
quarter beginning October 1, 2004, will be 5 percent for overpayments (4 percent
in the case of a corporation), 5 percent for underpayments, and 7 percent
for large corporate underpayments. The rate of interest paid on the portion
of a corporate overpayment exceeding $10,000 will be 2.5 percent.

Section 6621 of the Internal Revenue Code establishes the rates for
interest on tax overpayments and tax underpayments. Under section 6621(a)(1),
the overpayment rate is the sum of the federal short-term rate plus 3 percentage
points (2 percentage points in the case of a corporation), except the rate
for the portion of a corporate overpayment of tax exceeding $10,000 for a
taxable period is the sum of the federal short-term rate plus 0.5 of a percentage
point for interest computations made after December 31, 1994. Under section
6621(a)(2), the underpayment rate is the sum of the federal short-term rate
plus 3 percentage points.

Section 6621(c) provides that for purposes of interest payable under
section 6601 on any large corporate underpayment, the underpayment rate under
section 6621(a)(2) is determined by substituting “5 percentage points”
for “3 percentage points.” See section 6621(c) and section 301.6621-3
of the Regulations on Procedure and Administration for the definition of a
large corporate underpayment and for the rules for determining the applicable
date. Section 6621(c) and section 301.6621-3 are generally effective for
periods after December 31, 1990.

Section 6621(b)(1) provides that the Secretary will determine the federal
short-term rate for the first month in each calendar quarter.

Section 6621(b)(2)(A) provides that the federal short-term rate determined
under section 6621(b)(1) for any month applies during the first calendar quarter
beginning after such month.

Section 6621(b)(3) provides that the federal short-term rate for any
month is the federal short-term rate determined during such month by the Secretary
in accordance with § 1274(d), rounded to the nearest full percent
(or, if a multiple of 1/2 of
1 percent, the rate is increased to the next highest full percent).

Notice 88-59, 1988-1 C.B. 546, announced that, in determining the quarterly
interest rates to be used for overpayments and underpayments of tax under
section 6621, the Internal Revenue Service will use the federal short-term
rate based on daily compounding because that rate is most consistent with
section 6621 which, pursuant to section 6622, is subject to daily compounding.

Rounded to the nearest full percent, the federal short-term rate based
on daily compounding determined during the month of July 2004 is 2 percent.
Accordingly, an overpayment rate of 5 percent (4 percent in the case of a
corporation) and an underpayment rate of 5 percent are established for the
calendar quarter beginning October 1, 2004. The overpayment rate for the
portion of a corporate overpayment exceeding $10,000 for the calendar quarter
beginning October 1, 2004, is 2.5 percent. The underpayment rate for large
corporate underpayments for the calendar quarter beginning October 1, 2004,
is 7 percent. These rates apply to amounts bearing interest during that calendar
quarter.

Annual interest rates to be compounded daily pursuant to section 6622
that apply for prior periods are set forth in the tables accompanying this
revenue ruling.

DRAFTING INFORMATION

The principal author of this revenue ruling is Crystal Foster of the
Office of Associate Chief Counsel (Procedure & Administration). For further
information regarding this revenue ruling, contact Ms. Foster at (202) 622-7326
(not a toll-free call).